Tuesday, February 1, 2011

Where's the muni Apocalypse, Meredith?

“There’s not a doubt in my mind that you will see a spate of municipal-bond defaults,” the banking analyst Meredith Whitney, nodding her head, said on a Dec. 19 segment of CBS Corp.’s “60 Minutes.”

“How many is a spate?” correspondent Steve Kroft asked.

“You could see 50 sizable defaults, 50 to 100 sizable defaults, more,” said Whitney, 41, who made her name covering bank stocks. “This will amount to hundreds of billions of dollars’ worth of defaults.”

Those two sentences set off a month of fireworks. California Treasurer Bill Lockyer called the prediction “apocalyptic arm-waving,” the National League of Cities’ research director cited her “stunning lack of understanding,” and Pacific Investment Management Co.’s Bill Gross, who runs the world’s biggest bond fund, simply said he doesn’t subscribe to the “theory.”

Whitney doesn’t have specific numbers backing up her now- famous prediction, she said in a Jan. 30 interview. “Quantifying is a guesstimate at this point,” she said. “I was giving an approximation of a magnitude that will bear out to be correct.”

Meanwhile, investors pulled about $4 billion from municipal-bond mutual funds in the week ended Jan. 19, the most since Lipper US Fund Flows started compiling the data in 1992. The withdrawals marked the 10th-straight week of net redemptions, totaling $20.6 billion, according to Denver-based Lipper. Returns on municipal securities fell the most in 16 years in the 2010 fourth quarter, according to a Merrill Lynch Municipal Master Index. The cost for AAA-rated issuers to borrow for 30 years climbed by almost a third, to 5.09 percent on Jan. 17, from 3.85 percent Nov. 1.

‘Terrified Clients’

“The Whitney virus can be seen replacing the bird flu virus,” David Kotok, chief investment officer at Cumberland Advisors Inc. in Vineland, New Jersey, said in a Jan. 20 telephone interview. The firm manages more than $1.5 billion. “We’ve got terrified clients who call constantly and want reassurance because Meredith said there’s going to be hundreds of billions of dollars of defaults.”

The “60 Minutes” segment said Whitney and her colleagues spent “two years and thousands of man hours” researching the fiscal condition of the 15 largest states. On Sept. 28, Meredith Whitney Advisory Group LLC, the New York-based firm she started after becoming famous for correctly predicting Citigroup Inc.’s 2008 dividend cut, produced a report for clients called “Tragedy of the Commons.” The company, which charges at least $100,000 a year for its research, declined to provide a copy to Bloomberg News in September.

Report Doesn’t Mention

A copy of the 43-page report obtained since then doesn’t mention sizable defaults amounting to hundreds of billions of dollars. A person who has seen a long addendum that profiles the 15 top states said that the longer portion doesn’t, either.

“We are not calling for any specific defaults within the scope of this report,” the document says on page 42. An opening summary says there will “invariably” be local defaults, without elaborating.

“A lot of this is, You know it, but can you prove it?” Whitney said Jan. 30 over a breakfast of scrambled egg whites with a chicken-apple sausage, a side of salsa and peppermint tea at the Four Seasons Hotel in Midtown Manhattan. “There are fifth-derivative dimensions that I don’t think I need to spell out to my clients,” she said.
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Her report on munis is just pig slop dressed up with lipstick on it. Fifth derivative? Oh wait--We just had that Sunday--remember? Egypt was going to lead the whole world into an Apocalypse! How did that fith derivative dimension work?

Anyone that has listened to Meredith's market calls since 666 has lost money. But anyone who has listened to this call--to disregard Meredith has made money!

So here's an "As Advertised" and some slop for those who are new to Meredith's games. Back when she was still regarded as a high priestess on Wall Street!

Because her story is now so over.

Tuesday, March 17, 2009

One Femme Fatale's fatal flaw

Wall Street and Hollywood.

Real life, and reel life!

And lord knows, we must take Wall Street and our money serious! Isn't that what Jon Stewart taught us?

So let's have some fun, since we're not supposed to when we talk stocks!

Remember Sharone Stone, the femme fatale of the 90's?

Let's look at her domestic box office revenue:

Basic Instinct did $117 million.Sliver did $36 million.The Quick and the Dead did $18 million.

The more Ms. Stone bared her assets, the greater the box office! But when Ms. Stone needed to up her revenue, by reverting back to the same formula that brought her success, it didn't work.

Her bare days were over, but she didn't know it! She needed to change her role!

Wall Street's femme fatale has been Meredith Whitney, the former Oppenheimer analyst who has now started her own shop.

She used to terrorize the bulls with her market calls, and banking CEO's were afraid of her, as were men of Catherine Tramell's icepicks!

Meredith Whitney used to keep the financial world on edge, and she had the ability to move the markets. Especially, when the power was in the bear's hands, and the bearish hedge funds who generated fees through their relationship.

Let's check out her box office when she was on CNBC.

On February 21, 2008, when she was on CNBC the market dropped143 points or 1.2%On September 15, 2008, when she was on CNBC the market dropped504 points or 4.4%.
On November 5, 2008, when she was on CNBC the market dropped 486 points or 5%.
On December 1, 2008, when she was on CNBC the market dropped680 points or 7.7%.
Notice the progression? It's apparent, that the markets were listening to what she said. But just like Sharon Stone, she overplayed her role.

On Tuesday, March 10, 2009, she was on CNBC and Meredith warned the financial world of the perils of credit cards, on the day that we started the new bull market.

That day the Dow gained 379 points, or 5.9%; not quite the result her bearish clients wanted!

Today, one week later, Meredith tried again. The market was extended, and Monday we had a late day swoon. Her clients probably hoped she still had some magic left, to work the next morning!

It wasn't to be.

The market was up 178.73 points, or 2.48%, despite Ms. Whitney's bearish proclamations on credit. She said the banking industry would be worse in 2009 than in 2008!

Like Ms. Stone, Ms. Whitney needed to change her role.

And just like Ms. Stone, Ms. Whitney's bear days are over, but she doesn't yet know it.

When Sharon Stone, met Joey Ezterhaus after she signed for Basic Instinct, they had this dialogue:

S: You're so sly.
J: Why?
S: Catherine's last name. Trammell. I researched it. I know what it means.
J: What does it mean?
S: You know what it means.
(Michael Douglas "Will somebody end the suspense please?")
S: A tramell is a funeral shroud in Scottish mythology. Isn't that brilliant?

It was my sarcastic way of saying, that if you didn't buy into the bottom at 666, this bull market would bring it's own funeral to those who are bearish, who were waiting for the end of the world.

So why compare Ms. Stone to Ms. Whitney?

Because Meredith, like the name Tramell, also has interesting characteristics. But since I wrote about veils, while discussing Hebrew, and Jon Stewart's Jewish, let's look at Meredith through Hebrew eyes!